5 November 2014
There has been a noticeable acceptance of financial inclusion by financial regulators of late, a situation which bodes well for financial providers to come up with affordable products and services that meet the needs of low-income individuals.
“This is good news for the development of products and services in the mobile money and digital payments ecosystem,’ says Kim Dancey, regulatory head and specialist advisor for alternative banking at First National Bank (FNB).
Speaking to Fin24 , concerning her presentation at the up-coming AfricaCom conference taking place in Cape Town from 11 to 13 November, Dancey said the development mobile money technologies is growing in Africa, particularly in Southern Africa.
“An interesting development which, although being deployed across multiple regions, is particularly prevalent in Southern Africa is that of the mobile money companion card. These cards are usually a type of pre-paid card linked to the same source of funds as the mobile money account. A mobile money user can use the mobile phone or the card as the channel to make payments.’
In recent months, the African continent has experienced huge growth in the mobile money transaction and payment solutions. Mobile money systems like the popular M-Pesa have seen thousands of individuals who do not have conventional bank accounts able to send and receive money through mobile phones, opening up major economic opportunities in the process.
However, uptake of mobile money technologies in Africa has been slow, hampered by the apathetic adaptation by regulatory bodies of the financial inclusion policies advocated by African governments and central banks.
“A further challenge is that there is still a significant gap between the accepted potential for mobile money and the actual use of mobile money. The mobile money ecosystem still reflects a “dump-and-pump’ behaviour, where the “funds go in and then directly out’.’
Adding, Dancey said the challenge is to move mobile money “from being a payment instrument to an offering that is used as a money management tool’. “This challenge sits both on the supply side and on the demand side,’ she said.
On the supply side, Dancey said it is a question of the corporate appetite for serving low income segments, a business case that requires high and sustained use; as well as in the design of products and services that are appropriate and user friendly.
“On the demand side, to the individual, the mobile money offering has not yet become a means of improving financial wellbeing beyond the receipt and transfer of remittance funds,’ she said.
On how mobile money solutions will impact on small businesses, Dancey said research shows that small and micro enterprises (SMEs) in Africa see mobile money as key to doing business. She said many enterprises point out the time and cost savings in making mobile payments.
“Business owners pay, and are paid frequently, mobile money assists in lowering cost and saving time by enabling a more convenient means to make payments,’ she said, adding that mobile money assists as a means to increase the speed of the cycle from cash to inventory to receivables and back to cash.
A key challenge SMEs face is record keeping. Dancey said mobile money systems do not solve this requirement in a business. “[Therefore] consideration should be given to solving for this essential requirement to the potential success of a business,’ said Dancey.